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Businesses always operate under a certain degree of uncertainty, and planning for the “what-ifs" is critically important. Now that we're facing the biggest what-if to date, scenario planning is a key factor in preparing your business for the future.

For some time now, business owners have been focused on addressing immediate needs and answering the questions of the moment. How can we earn revenue right now? How do we pay our bills? Can we retain our staff? Yet as the country re-opens, owners can begin shifting their attention to the future. But how do you plan for the next few months and years when there is so much uncertainty lining the road ahead?

Business scenario planning is a tried and true tool for business owners. Often defined as “what-if” planning, business scenario planning involves making assumptions on what the future will bring, and gaining an understanding of how different situations – or scenarios – will affect your business.

For instance, what would happen if you lost half your clients? What if you didn’t get paid on time? What if you need to hire additional employees to uphold new safety policies? What if you run out of cash?

Scenario planning lets you see alternative versions of your future business, giving you the opportunity to detect potential pitfalls or cash gaps before they happen. It can also stress test your plans against a variety of situations.

As Lori Darlington, RBC’s Vice-President of Small Business and Strategic Partnerships, says in the RBC Disruptors Small Business’s Digital Pivot podcast, “Scenario planning is going to be key as we look to move forward. Owners really need to understand what their financials are going to look like as they start to re-open. So much of the fundamentals of how folks are running their business are going to change and be challenged.”

While you may not be able to control every aspect of your business during a prolonged period of uncertainty, this exercise may help you take the guesswork out of where your business will be in six, twelve and eighteen months from now.

To help guide you through your scenario planning, and assist you as you forecast for the future, here are five questions to ask yourself.

1)Where is my business today?

  • Before you can start planning, you’ll want to take stock of where your business is now. And this starts with cash flow.
  • To get started, take a snapshot of your cash flow and assess what’s due to come in and what’s expected to come out. Take a look at our article Managing Cash Flow in a Time of Crisis: Six Strategies For Business Owners to learn more about the areas of impact to consider.

Other Cash Flow Resources

  • RBC Cash Flow Tool: Get an analysis of your current cash flow position, and advice to help you improve it.

Interactive Cash Flow Template


If your business requires a more in-depth cash flow assessment, you can look at your financial ratios to get a pulse check of the stability and health of your business.

Learn how to assess your business performance using financial ratios

2)How will industry restrictions affect my revenue?

Some industries have felt the impact of COVID-19 more than others. According to RBC’s recent survey of 22,000 Canadian business owners, “Small Business: Big Pivot,” firms in five sectors – accommodation and food services, arts and entertainment, non-essential retail, mining and oil & gas services, and commercial real estate leasing – are the most vulnerable.

As these industries begin to re-open, they will continue to feel the impact of the pandemic, given ongoing restrictions and precautions. Be sure to stay up-to-date on government regulations and industry best practices when it comes to maintaining a safe environment for you, your employees, and customers. If your business is only permitted to operate at a 50% capacity, can you survive at 50% of pre-COVID revenue?

3)What will my future cash flow look like?

  • Based on your capacity and potential revenue limitations, what will your cash flow look like in six, twelve and eighteen months? Here’s where you can really dig into your scenario planning:

  • What if you operate at reduced capacity? Can you reduce your costs correspondingly?
  • What if you need to hire additional employees to help maintain distancing measures?
  • What if you can pivot more of your business online?
  • What if you move to a smaller and/or less expensive location?

Consider the what-ifs that are relevant for your business and chart out three different scenarios for the next six to eighteen months based on assumptions that range from pessimistic to optimistic. The Cash Flow Worksheet can help here again as you flesh out the impact of these areas on your business:

  • Cash flow
  • Variable and fixed expenses – including additional costs related to dealing with COVID, such as purchasing PPE for employees
  • Employee requirements
  • Supply chain and inventory

After running your scenarios, if you see a risk of not returning to pre-COVID business operations and income, it may be time to consider ways to pivot or adjust your business to protect it down the road.

  • Double down on digital. Can you turn your information-based web site to an e-commerce engine?
  • Cut expenses. Can you cut discretionary costs to extend your burn rate?
  • Evaluate product. Which lines are doing well for you, and which ones are stagnant? Reducing your product offering may help reduce costs.
  • Assess your customer base. Are there new customer opportunities out there given the pandemic and/or any shifts in product offering?
  • Make employee decisions. Do you need to make hard decisions on staffing? If maintaining your current team is important to you and your corporate vision, how can you reduce costs in other areas?

4)How will deferring or taking on more debt affect my bottom line?

As Lori Darlington explains in the RBC Disruptors Small Business’s Digital Pivot podcast:

“One thing we do hear from small business owners is that with all of the uncertainty that we’ve got through this crisis, they are not looking or comfortable taking on additional debt. It all comes back to this uncertainty. There is a lot of discussion around whether demand will ever get back to what it was before, so it’s difficult for small businesses to consider how they need to help their business survive through this crisis. But then at the same time they need to be careful not to take on more debt than they’ll be able to handle once we get through this crisis.”

  • Remember, though, that debt isn’t the only option to relieve cash pressures at the moment. Costs that were previously non-negotiable – such as rent, loan payments and utilities – could potentially be deferred, depending on your landlord or lender(s).

  • Investigating what options can both sustain you today without sabotaging your future recovery efforts will be a critical exercise as you re-open.

5)Who will manage my business if the unexpected happens to me?

It’s important to remember that this has been both a health crisis and an economic crisis – and the health and safety risks are still very present, albeit more so in some parts of the country over others.

At this time more than ever, it’s important to have discussions with key members of your team, and develop plans based on wellness scenarios, including:

  • What if you got sick and were unable to work for 6-8 weeks?
  • What if key members of your team were out with an illness?
  • What would happen if you or a key team member had to leave the business permanently due to illness, death, or personal circumstances?

Business owner scenario planning is a process every business owner should take on. From investment planning, insurance counseling to estate and trust solutions, creating a comprehensive plan can help ensure that you, your family and your business are all properly protected.

Business owners are often rightfully credited for being among the most creative, innovative and persistent individuals. This is the time to tap into those unique superpowers and find ways to imagine the future and potentially reimagine areas of your business.

As identified in the survey conducted by RBC Thought Leadership: “It’s not going to be an easy time. But for many, it’s also the exact right time to be looking for change.”

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